Oracle Earnings, CPI in Focus After Sell Off
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Welcome to the Schwab Market Update podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead. I'm Keith Lansford, and here is Schwab's early look at the markets for Tuesday, March 11th. After Monday's harsh sell-off, investors digest Oracle's earnings and await tomorrow's Consumer Price Index.

Though inflation remains untamed and above the Federal Reserve's 2% goal, economic growth concerns seem to have replaced inflation as the market's prime concern. Oracle reported late Monday and more tech earnings come tomorrow as Adobe opens its books. Oracle shares wavered in post-market trading after the company's latest quarterly results missed on both revenue and earnings per share.

The stock appeared to get an initial boost from news that Oracle had signed cloud agreements with several major tech firms, including NVIDIA and Meta Platforms, according to Behrens. Major indexes collapsed to nearly six-month lows Monday after President Trump declined to rule out a recession.

With no sign of any change in tariff plans and a Federal Reserve hesitant to ease rates, Wall Street lacks two support pieces investors leaned on earlier this year when they bought dips. The selling pressure weighed most heavily on tech shares that led last year's rally, with six of the magnificent seven stocks now among the bottom 350 S&P 500 performers year-to-date.

The S&P Technology Select Sector Index was down 14% from its last high as of intraday Monday, but still needs to fall a couple more percentage points to be worse than the pullback tech experienced last summer. Highly capitalized tech, communications services, financials, and consumer discretionary formed the foundation of Monday's sell-off.

Besides Tesla, other magnificent seven shares like Apple, Nvidia, and Alphabet suffered sharp losses. Bank shares have also suffered in the sell-off because they're often seen as proxies for the economy. A slight comeback in mega caps the last half hour kept the S&P 500 from closing near its intraday lows.

Risk-off sectors like utilities and consumer staples ended up near the top of Monday's scorecard. Defensive leadership persists, said Lizanne Saunders, chief investment strategist at Schwab. On a technical basis, the S&P 500 index fell below its 200-day moving average for the first time since late 2023, a significant move because that trend line has long represented support for the market.

The S&P 500 is down 4.5% year-to-date. The Nasdaq Composite is in correction territory, down more than 10% from its last high. Volume was above average yesterday, a sign that bearish conviction was likely quite strong, and declining shares led advancing ones by a more than 3-to-1 margin at the New York Stock Exchange.

In the past couple of weeks, investors have watched the Atlanta Fed's GDP Now tracker drop into negative territory. The City Economic Surprise Index turned negative for the first time since September, and the ISM manufacturing PMI show higher prices paid, accompanied by lower employment and new orders. That's not a great combination for markets, which have moved from concerns about inflation to a growth scare.

Growth concerns have pummeled the Magnificent Seven, with six of those seven in the bottom 350 in S&P 500 year-to-date performance. This is partly due to valuations and partly to analysts' expectations for 2025 Magnificent Seven earnings that have begun to slow pretty dramatically of late, from 35% in 2024 to 15% in 2025.

As of late Monday, the CME FedWatch tool puts 95% odds on a rate pause at the Federal Reserve's meeting next week. Odds of a May rate cut are close to 50%, and the market still builds in a 90% chance of at least one 25-basis point cut by June.

The Fed is now entering its quiet period ahead of next week's meeting. Before that, Fed Chairman Jerome Powell and Fed Governor Adriana Kugler said late last week that they don't feel hurried to lower rates. Treasury auctions start today with three-year notes on the block. Tomorrow features a 10-year note auction. If these see enthusiastic buying, it could mean investors are less worried about inflation and more concerned about economic growth.

Tomorrow's February CPI, due at 8.30 a.m. ET, is expected to show 0.3% monthly gains for both headline and core consumer prices, analysts say, down from 0.5% and 0.4% in January. Gasoline prices fell in February and may help ease the headline CPI number, but that won't play into the core reading that excludes food and energy.

Washington, D.C. takes center stage this week as legislators work to avoid a possible government shutdown. A vote could come as early as today, but it's unclear if there are enough Republican votes to get the plan over the finish line. The 10-year Treasury note yield fell sharply yesterday to 4.21 percent, above last week's lows but still near the lowest levels since last autumn. This likely reflects investors chasing perceived safety in fixed income.

The S&P 500 index shed 155.63 points Monday, or 2.69%, to 5,614.56. The Dow Jones Industrial Average fell 890.01 points, or 2.08%, to 41,911.71.

and the Nasdaq Composite lost 727.90 points, or 4%, to 17,468.33 in its worst session since 2022. This has been the Schwab Market Update Podcast.

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